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High carry-forward Chinese cotton stocks raise concerns
Sep '12
The high-carry forward Chinese cotton stocks at the beginning of the new Chinese cotton year beginning September 1, 2012 has become a matter of worry and is cause of concern for those in the global cotton trade.

Each of the cotton experts, fibre2fashion spoke to expressed their concerns over this huge carry forward stock, which has surged by an astounding 60 percent from the same time last year.

Unconfirmed reports, but confirmed by two of these experts, indicate that Chinese cotton inventory at the beginning of the new Chinese cotton year, has skyrocketed to 6.718 million tons, up a staggering 59.95 percent from 4.20 million tons from a year earlier.

Mr David Lindsay - General Manager at Australia-based Namoi Cotton Co-Operative Ltd says, “Prices could come under immense pressure if either China does not purchase cotton in the same volumes as it did in the previous season or if it releases its state cotton reserves”.

Mr Ghulam Rabbani a Pakistan based cotton and yarn trader of repute reveals, “The huge Chinese cotton stocks are already depressing cotton prices. Spinners around the world are staying on the sidelines and purchasing carefully, by not stocking but buying on a day-to-day basis”.

He adds, “As per my analysis, China will purchase cotton, but with less interest and at a slow pace. But when prices will ease, they will definitely buy cotton to average out their existing stocks. I fear that the absence of Chinese dragons will drag down cotton prices”.

“However, the two biggest cotton producers and consumers – China and India, will be hurt the most if cotton prices slide down, since both the countries are expected to have a very good cotton crop in the new cotton season”, he wound up by saying.

Mr Vishwanathan – Vice President of Indian Cotton Federation says, “The first impact will be on Chinese cotton purchases in the new season, which we expect to decline. Apart from this, the economic slowdown in the developed countries has impacted exports of textile and apparels from many countries, which has resulted in subdued demand for cotton”. 

“It has also been reported that the cotton crop in the US, India and Brazil is good this season. In January and February, which is the peak cotton arrival period in India, cotton purchases by textile mills in this period too goes down”, he explains.  

Mr Vishwanathan adds, “All these factors could lead to cotton prices gradually falling to a certain extent in the new cotton year 2012-13”.

Mr Dhiren Seth of Cotton Association of India says, “If the Chinese cotton reserves stay as reserves, then I do not foresee any impact on cotton prices. The problem can start only if they start unloading those reserves in the market, since it has the potential to depress prices”.

“Secondly, if China does not purchase cotton as it did in its previous cotton season, then this too could also impact prices. The Indian government may also need to announce higher minimum support prices (MSP) for raw cotton in that case”, he adds.

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